Ten years of spending

While working on an upcoming article on how the divisions stack up against each other in the new millenium, I made payroll one of the comparable factors. This allowed direct comparison between leagues. The other factors used—winning percentage, playoff success and wild card berths—are obviously confined to their own leagues, with the exception of the small sample sizes of World Series victories and interleague play.

However, as I worked out a formula to factor in payroll with the three other areas, I realized it’s not really relevant. As the Cubs and Mets have shown, spending money is not equivalent to winning. So I had a spreadsheet that contained every team’s total salary for the past 10 years as well as the division, league and major league averages. Thinking that this could be salvaged into something, I put together the following survey of spending in the last decade.

The American League East

Average percentage of league mean: 125 percent

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No surprises here. Each team generally follows the expected trend of increasing payroll each year. The Yankees and Red Sox started the decade neck and neck, but the Yankees broke away quickly. Despite starting at a pedestrian-by-today’s standards $112 million (1.7 times the league average? Ha!), the team increased payroll sharply until arriving at $208 million in 2005 (a record 2.8 times the league average), then leveling off around that range, dropping to $206 million to finish out the decade (2.3x).

The Yanks have never fallen below first overall, the only question being how much they’ll spend compared to the league average. New York had nine playoff appearances in this time, missing out only in 2008.

The Red Sox have also performed as expected, having the second-highest payroll every year except 2003 (when they were outspent by the Mets, Braves, Dodgers, Rangers and Yankees), 2008 (Mets, Tigers) and 2009 (Mets, Cubs). Coincidentally, the Red Sox made the playoffs in each of those years, but did not win the World Series. The team has ranged from 1.4x the league average (2003) to 1.8x (2004). Boston has six playoff appearances in this time, taking the wild card five of these years.

Unsurprisingly, life is hard for the Orioles, Blue Jays and Rays. While the Orioles and Blue Jays have managed a reasonable 90 and 93 percent of the league average, respectively, it doesn’t help that the AL East spends 125 percent of the league average overall. The Rays displayed a trend common in Florida baseball, fluctuating from less-money-than-A-Rod-alone makes to a number approaching the league average. The then-Devil Rays managed to spend an American-League-record low $19.6 million in 2003 (28 percent of the league average) before topping out in 2010 at $71.9 million (79 percent).

The three hapless teams combined for all of two playoff appearances, both of which belonged to the Rays (2008 and 2010). In fact, Baltimore and Toronto were the only teams in the majors outside of Kansas City, Pittsburgh and Washington not to make the postseason in the entire decade. While the 2008 Rays were the least likely playoff team during this time (compared to their payroll ranking), with the 2011 Rays losing plenty of their top-tier talent and the Red Sox and Yankees not seeing any major drop in talent, expect more of the same.

AL Central

Average percentage of league mean: 87 percent

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While the AL East graph showed some team-to-team consistency (save possibly the Rays), the AL Central graph shows a mess. The Twins have been an underdog, spending more than the league average only once, in 2010 . This is especially impressive considering they were almost contracted into oblivion. The AL Central is the lowest-spending division on average, with the White Sox being the only team to average above the major league average during the ten-year period.

No team remained above the league average the entire time, but the Royals have managed to be consistently well underneath. As a result, they were the only team to not make the playoffs from this division the entire period. A particularly pathetic show of spending by the division came in 2003, with not a single team managing to spend the league average, and the five teams averaging out a record-low 68 percent of the league average. And all this despite not having a team from Florida.

AL West

Average percentage of league mean: 101 percent

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The AL West graph confirms our suspicions: The A’s are always at the bottom (with the exception of 2004, when the Rangers finally got the horrendous Alex Rodriguez contract shipped to New York), the Mariners are always in second place, and the Angels have dominated spending since the Rangers got rid of their Dominican albatross. Despite the Angels having one of the smallest fan bases according to Harris polls, they’ve remained a solid spender in the latter half of the decade. Being located in Orange County might help with that.

The little spenders have had success in the AL West, mostly thanks to Billy Beane managing to make the playoffs four times despite no one in Oakland being aware they have a baseball team. Also, when the Mariners are the No. 2 spending team every year, it becomes a bit easier for the No. 3 and No. 4 teams to make the playoffs. The AL West is the only division not containing the Yankees and Red Sox that has been able to spend above the league average during the 10-year window.

NL East

Average percentage of league mean: 99 percent

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The NL East is rather consistent for teams not based in Florida. The Marlins hold the record for smallest team salary since 2000 with a paltry $14 million showing in 2006. Jayson Werth is due to make more money in 2011 than the 2006 Marlins paid their entire team. The Mets have been on top of the heap for the entire time, save 2010 when the Phils edged them. Around 2003, the Phillies realized they’re actually in the sixth-biggest city in the country, and started to spend like it.

The Braves are consistently either in second place or clinging to the Phillies’ line for second. The Expos/Nats have consistently been about two-thirds of the league average, never quite approaching the mean line. The NL East has spent the most in the National League, and yet has sent the fewest teams to the playoffs. I blame the Mets on both counts.

NL Central

Average percentage of league mean: 92 percent

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The NL Central is a jumble. Every data point lies between $30 and $100 million, with the exception of the underspending 2004 Brewers and the overspending post-2007 Chicago Cubs (looking at you, Alfonso Soriano). How Jim Hendry has managed to keep his job escapes me.

During the first half of the decade, the Cubs and Cards fought closely for divisional spending supremacy. The Astros mostly clung to the league average, sometimes even passing the Cards for second place. The Reds, Brewers and Pirates all remained well under the league average. The Pirates notably started higher and then tailed off. As their fan base continues to dwindle and they continue to profit anyway, expect more of the same.

The Brewers bottomed out in 2004, but have since bounced to numbers approaching the league average. The Reds seemed content to hang out with the Brewers and Pirates. The 2010 Reds managed to be the only bottom-two team in spending in the NL Central to make the playoffs during the 10-year window.

NL West

Average percentage of league mean: 96 percent

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The NL West graph suggests the most inconsistency outside the AL Central. The Dodgers have taken advantage of their location, topping the charts eight years out of 10. The 2002 Diamondbacks and 2005 Giants were the only teams to knock them into second place.

The Diamondbacks are one of just a few teams to make the playoffs as a top-two and a bottom-two spending team in their division. The team took advantage of their revenue following the unlikely 2001 championship season and spent more than anyone not in LA in 2002. They were awarded with another playoff appearance, but soon realized the lackluster Arizona market could not sustain this payroll. The D-backs have been hanging with the Padres and Rockies ever since. The Giants have been in the top two spenders ever since the D-backs tailed off.

The Padres are another team located in a city larger than its market. Despite San Diego being a top-10 city nationwide, the Padres have spent most of the decade in the bottom of the division. The 2010 Padres almost became the least likely playoff team in the decade based on spending, but a late-season slump prevented this. Giving Bud Black the Manager of the Year award seems that much more vindicated.

The Rockies have been bottom two for the most part, taking the reins in the middle years when the Padres increased their payroll. The team saw a steep climb from 2009 to 2010, one that will only get bigger as they keep offering players ridiculous long-term contracts. Only time will tell if the Rockies will be the Mets/Cubs of the West or if this increase will end positively, as it has for the Phils and Angels.

Division vs. division

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The AL East is far and away on top the entire time, with a narrow exception in 2003 when the AL West peaked just as the AL East bottomed out. The next year, A-Rod was traded from the Rangers to the Yankees, which single-handedly increased the AL East divisional average by $5 million. While the Alex Rodriguez contract put a squeeze on Texas, it has not had nearly the effect on New York.

The sad truth is that some players will be purchasable only by the largest markets. The smaller markets can try to splurge, but this often leads to the inability to spend on other needed areas.

As mentioned above, the AL Central has been amazingly inconsistent. It spent the first six years on the bottom of the salary chart, only to mingle with the league average during the latter part of the decade. Somewhat surprisingly, the NL West has been on the bottom for the past three years. This may be due to not having a team like the Yankees/Red Sox/Cubs/Mets now that the Dodgers have slowed down, as well as underspending teams in San Diego and Arizona.

As spending is expected to increase from year to year, I calculated how much each team spent in comparison to the league average. This way the final average of the averages gave us a more relevant, normalized number.

NYY        2.292 (1st in division, 9 playoff appearances)
BOS        1.615 (2nd in division, 6 playoff appearances)
NYM        1.466 (1st in division, 1 playoff appearance)
LAD        1.313 (1st in division, 4 playoff appearances)
CHC        1.261 (1st in division, 3 playoff appearances)
ATL        1.215 (2nd in division, 6 playoff appearances)

LAA        1.197 (1st in division, 6 playoff appearances)
TEX        1.174 (2nd in division, 1 playoff appearance)
STL        1.132 (2nd in division, 6 playoff appearances)
PHI        1.130 (3rd in division, 4 playoff appearances)
SF         1.083 (2nd in division, 3 playoff appearances)
CWS        1.077 (1st in division, 2 playoff appearances)

HOU        1.044 (3rd in division, 3 playoff appearances)
DET        1.029 (2nd in division, 1 playoff appearance)
SEA        0.977 (3rd in division, 1 playoff appearance)
ARI        0.946 (3rd in division, 3 playoff appearances)
BAL        0.930 (3rd in division, 0 playoff appearances)
TOR        0.899 (4th in division, 0 playoff appearances)

CLE        0.829 (3rd in division, 2 playoff appearances)
COL        0.801 (4th in division, 2 playoff appearances)
CIN        0.784 (4th in division, 1 playoff appearance)
MIN        0.741 (4th in division, 6 playoff appearances)
MIL        0.725 (5th in division, 1 playoff appearance)
OAK        0.700 (4th in division, 4 playoff appearances)

SD         0.684 (5th in division, 2 playoff appearances)
KC         0.666 (5th in division, 0 playoff appearances)
MTL/WSH    0.633 (4th in division, 0 playoff appearances)
PIT        0.581 (6th in division, 0 playoff appearances)
TB         0.531 (5th in division, 2 playoff appearances)
FLA        0.513 (5th in division, 1 playoff appearance)

Although there are exceptions, money matters.

Let me put this another way. In each of the past 10 years, the teams that have spent the most on payroll in their division, or the second-most, have made the playoffs 49 times—27 times in the American League and 22 times in the National. During the same time, the bottom two teams in payroll spending have made the playoffs 16 times; 11 in the American and five in the National.

It’s interesting that the American League has had more high-spending winners than the National while also having more low-spending surprise teams. But this is partly a structural thing; the American League West has only four teams while the National League Central has six, so there are more “middle payroll” teams in the NL.

Here are the specifics:

Top two teams in payroll per year that made the playoffs:
AL East: 15 (2001, 2002, 2003, 2004, 2005, 2006, 2007, 2009, 2010 Yankees) (2003, 2004, 2005, 2007, 2008, 2009 Red Sox)
AL Central: 6 (2001 Indians) (2003, 2004 Twins) (2005, 2008 White Sox) (2006 Tigers)
AL West: 6 (2001 Mariners) (2004, 2005, 2007, 2008, 2009 Angels)
NL East: 7 (2001, 2002, 2003 Braves) (2006 Mets) (2007, 2009, 2010 Phillies)
NL Central: 7 (2001, 2002, 2004, 2005 Cardinals) (2003, 2007, 2008 Cubs)
NL West: 8 (2001, 2002 Diamondbacks) (2003, 2010 Giants) (2004, 2006, 2008, 2009 Dodgers)

American League total: 27
National League total: 22
MLB total: 49

Bottom two teams in payroll per year that made the playoffs:
AL East: 2 (2008, 2010 Rays)
AL Central: 3 (2007 Indians) (2002, 2009 Twins)
AL West: 6 (2001, 2002, 2003, 2006 Athletics) (2002 Angels) (2010 Rangers)
NL East: 1 (2003 Marlins)
NL Central: 1 (2010 Reds)
NL West: 3 (2007, 2009 Rockies) (2007 Diamondbacks)

American League total: 11
National League total: 5
MLB total: 16

Highest spending in relation to league average:
1. 2005 Yankees (2.84126 times the league average)
3. 2004 Yankees (2.65607)
2. 2006 Yankees (2.51117)
4. 2008 Yankees (2.33504) [no playoffs]
5. 2007 Yankees (2.29508)
6. 2009 Yankees (2.27578)
7. 2010 Yankees (2.26888)
8. 2003 Yankees (2.14795)
9. 2002 Yankees (1.86575)
10. 2004 Red Sox (1.83560)
11. 2010 Red Sox (1.78607) [no playoffs]
12. 2007 Red Sox (1.73099)
13. 2001 Yankees (1.71967)
14. 2001 Dodgers (1.67066) [no playoffs]
15. 2003 Mets (1.64751) [no playoffs]
16. 2009 Mets (1.68819) [no playoffs]
17. 2005 Red Sox (1.68457)
18. 2001 Red Sox (1.68444) [no playoffs]
19. 2010 Cubs (1.61230) [no playoffs]
20. 2002 Red Sox (1.60641) [no playoffs]
21. 2002 Rangers (1.56640) [no playoffs]
22. 2006 Red Sox (1.54901) [no playoffs]
23. 2008 Mets (1.53883) [no playoffs]
24. 2008 Tigers (1.53771) [no playoffs]
25. 2002 Diamondbacks (1.52343)
26. 2009 Cubs (1.52321) [no playoffs]

Surprisingly, half of these teams did not make the playoffs. The Red Sox offended four times, but they have the excuse of being behind the Yankees. Six of the remaining nine non-playoff slots are held by the Mets, Cubs and Tigers, three teams famous for clueless spending. The 2001 Dodgers and Rangers were also in eras of front office incompetence of their own.

But there is no denying that while the Yankees viciously outspend the league, nine playoff appearances out of 10 is the result. This is the goal of every team, and it’s good on them to be able to do it. Yes, they spend the most each and every year, but the Cubs and Mets have shown that spending does not guarantee success. Actually, I’ll continue to maintain that the Cubs and Mets are incompetent rather than give the Yankees a compliment.

Lowest spending in relation to average:
1. 2006 Marlins (.19346)
2. 2008 Marlins (.24344)
3. 2003 Devil Rays (.27552)
4. 2007 Devil Rays (.29173)
5. 2001 Twins (.36905)
6. 2007 Marlins (.36920)
7. 2010 Pirates (.38383)
8. 2004 Brewers (.39654)
9. 2005 Devil Rays (.40921)
10. 2009 Marlins (.41583)
11. 2010 Padres (.41572)
12. 2007 Nationals (.45151)
13. 2006 Devil Rays (.45658)
14. 2004 Pirates (.46431)
15. 2007 Pirates (.46604)
16. 2008 Rays (.48912) [playoffs]
17. 2009 Padres (.49380)
18. 2004 Indians (.49459)
19. 2004 Devil Rays (.49603)

The Athletics and Royals are conspicuously absent from this list, despite being among the bottom tier in spending overall. While neither team ever spent the league average in any one year, they consistently maintained a floor of at least 50 percent of the mean. Only one team managed to spend under half of the league average and make the playoffs, the surprise 2008 Rays. The 2010 Padres nearly became the second team, but a midseason collapse ended that idea.

In conclusion, spending a lot of money is good for your team’s record. Billy Beane is a genius, Florida baseball is nuts, Brian Cashman deserves more credit than he gets, Jim Hendry should not have a job any more than Omar Minaya, the 2008 Rays and 2010 Padres were amazing, the Angels have a ridiculous payroll-to-fanbase-ratio, the AL Central is perpetually screwed, and the Mets are pathetic.

And that’s the big picture.

References & Resources
The source I used was the USA Today MLB salary database.

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Comments

  1. GreggB said...

    Great data, well presented. 

    From my perspective, there IS no serious problem in baseball spending patterns.  Spending big helps, but doesn’t guarantee success (Cubs, Mets).  Low payroll is a disadvantage, but not prohibitive (Marlins, Rays, Twins).  For the health of the sport, I wouldn’t want it any other way.

    The teams with dedicated fan bases DO raise more revenue; provided the owners invest it in developing talent for the fans to enjoy, isn’t that as it should be? 

    The only issue I see with spending in baseball is with those few owners who don’t reinvest the fan’s dollars (or revenue sharing funds) in strengthening their team.

  2. John said...

    Looks like the Nats will be pushing close to the league average in 2011, leaving the Marlins to hold down the spending fort in the NL East.

  3. Vin said...

    Quick demographic note on your observation on San Diego – the Padres are not underspending. While San Diego is a large city, it is a smallish metro area. Its potential as a market is also limited, being hemmed in by an international border to the south, a much larger, well-established, MLB market to the north, unpopulated desert to the east, and (obviously) ocean to the west.

    If market size were merely a function of the size of a team’s home city, the Red Sox would be a mid-market team.

  4. Matt Bowling said...

    I would say that how big a city is does not always correspond to how big a market it is.  Montreal is a huge city but obviously its baseball market was limited.  There is also metro area to consider.  Much of Boston’s population is actually outside of what is technically “Boston.”  Sometimes it all merges into one… San Jose is actually bigger than San Francisco but anyone who has been to the two cities realizes that this does not tell the whole story.  And I lived some 60 miles from Los Angeles and still felt a part of the behemoth known as “LA.”

    It is sad that money counts for so much in baseball but the truth is that it has always been that way. Look at the history of the St. Louis Browns and the Yankees and that is pretty clear.

  5. Matt Binder said...

    @GreggB: While it does not guarantee success or the lack there of, I would definitely call it an unfair advantage. Yes, there are exceptions (the Cubs, Mets, A-Rod lead Rangers, Twins, Rays), but that’s what they are – exceptions. The rules are obviously favoring those old teams that got there first. We’re 50 years into expansion era and have not had one world series between expansion teams.

    I know it seems fair to reward the best fans with the biggest payroll teams, but I’m more of the opinion that a more competitive league would be better for the sport. The Cowboys and Maple Leafs still make plenty of money even if they haven’t been able to win so much lately.

    I see your point about teams that intentionally don’t spend. The fact that the Pirates make as much profit as they do is kind of disheartening. At least the Nationals are sending out the vibe they’re trying with the Werth contract.

    @Jacob: I thought so, but as a fan of a team that spends high and doesn’t really win I don’t have so much right to complain.

    @John: I get the feeling the Werth contract was somewhat of a token gesture to throw a bone at the fanbase. But they have a very strong minor league system, so who knows what’ll happen?

    @Vin and Matt: It’s true, San Diego does not really scream media presence. It’s the 16th biggest metro area with a team (17th after Toronto) and they have to compete with the Dodgers.

    Thanks for the comments!

  6. Matt Binder said...

    Wow, interesting fact I just noticed – the top spender in each division is based in either NY, LA or Chicago. The three cities that have two teams can definitely support ‘em.

  7. zubin said...

    I think you are greatly underestimating the Angels’ fan base.  They are in the center of a geographically small (and wealthy) county of 3 million+ people.  A short drive to the north, LA county holds close to 10 million people.  Riverside county has another 2 million+ people clustered along the eastern border of the county.  Even if you figure that the Angels share much of that population base with the Dogers and to a lesser extext the Padres, it is still a large market.

  8. Bryan M said...

    Great information and its nice to see the data proves that it takes more than just money to win.  Hopefully, this will curb the smaller market teams crying about the big bad Yankees and Red Sox all the time.

    The only issue I have is patting Billy Beane on the back like everybody does.  In the data, I would argue the Twins deserve more praise for practicing Billy Ball than Beane and have been able to parlay that success into a strong base, a new stadium and ability to increase payroll.

    I would also argue that Billy Beane and the A’s have not had much success in 1) fielding a competitive offense and 2) able to get into playoffs in recent memory.  All the playoff spots they obtained were in the early 2000’s when Texas and Seattle were poorly GM’d.  In recent memory Billy balls has not worked out very well.

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